BILL NUMBER: AB 1326 AMENDED
BILL TEXT
AMENDED IN ASSEMBLY APRIL 20, 2015
INTRODUCED BY Assembly Member Dababneh
FEBRUARY 27, 2015
An act to add Division 11 (commencing with Section 26000) to the
Financial Code, relating to virtual currency.
LEGISLATIVE COUNSEL'S DIGEST
AB 1326, as amended, Dababneh. Virtual currency.
Existing law, the Money Transmission Act, prohibits a person from
engaging in the business of money transmission in this state, or
advertising, soliciting, or holding itself out as providing money
transmission in this state, unless the person is licensed by the
Commission of Business Oversight or exempt from licensure under the
act. Existing law requires applicants for licensure to pay the
commissioner a specified nonrefundable fee and to complete an
application form requiring certain information. As security, existing
law requires each licensee to deposit and maintain on deposit with
the Treasurer cash in an amount not less than, or securities having a
market value not less than, such amount as the commissioner may find
and order from time to time as necessary to secure the faithful
performance of the obligations of the licensee with respect to money
transmission in this state. Existing law requires a licensee at all
times to own eligible securities, as defined, in a specified
aggregate amount not less than the amount of all of its outstanding
money received for transmission, as specified.
This bill would prohibit a person from engaging in this state in
the business of any virtual
currency, currency business, as defined,
in this state unless the person is licensed by the
Commissioner of Business Oversight or is exempt from the licensure
requirement, as provided. The bill would require applicants for
licensure licensure, including an applicant
for licensure and approval to acquire control of a licensee, to
pay the commissioner a specified nonrefundable application
fee and complete an application form required to include, among
other things, information about the applicant, prior virtual
currency services provided by the applicant, a sample form of receipt
for transactions involving the business of virtual currency, and
specified financial statements. The bill would require
make these licenses subject to annual renewal and
would require a renewal fee paid to the commissioner in a
specified amount. The bill would require licensees to annually pay
the commissioner a specified amount for each licensee branch office.
The bill would require applicants and licensees to pay the
commissioner a specified hourly amount for the commissioner's
examination costs, as provided. The bill would also require the
commissioner to levy an assessment each fiscal year, on a pro rata
basis, on licensees in an amount sufficient to meet the commissioner'
s expenses in administering these provisions and to provide a
reasonable reserve for contingencies.
This bill would require each licensee to maintain at
all times such capital as the commissioner determines, subject to
specified factors, is sufficient to ensure the safety and soundness
of the licensee, its ongoing operations, and maintain consumer
protection. To satisfy this capital requirement, the bill
would require each licensee to invest an aggregate amount equal to
the value of the virtual currency that the licensee has on deposit
for its customers in only specified investments. The
bill would require each licensee to maintain a bond or trust account
in United States dollars for the benefit of its customers in the form
and amount as specified by the commissioner.
This bill would authorize the commissioner to examine the business
and any branch office of any licensee to ascertain whether the
business is being conducted in a lawful manner and all virtual
currency is properly accounted for. The bill would require a licensee
to file a report with the commissioner within a specified period of
time after the licensee knows about the occurrence of certain events
relating to the virtual currency business and those persons connected
to that business, and to also maintain records as required by the
commissioner for a specified period of time.
With regard to enforcement, among other things, this bill would,
if it appears that a licensee is violating or failing to comply with
these provisions or conducting business in an unsafe or injurious
manner, authorize the commissioner to order the licensee to comply or
discontinue those practices. The bill would also authorize the
commissioner to issue an order suspending or revoking a license, or
placing a licensee in receivership, if after notice and an
opportunity for a hearing, the commissioner makes a specified
finding. The bill would provide that every order, decision, or other
official act of the commissioner is subject to review.
This bill would authorize the commissioner to impose a civil
penalty for a violation of these provisions. The bill would also make
it a felony for a person to intentionally make a false statement,
misrepresentation, or false certification in a record filed or
required to be maintained or to intentionally make a false entry or
omit a material entry in such a record. The bill would also make it a
felony for a person to knowingly engage in an activity for which a
license is required without being licensed or exempt from licensure,
as provided. By creating these new crimes, the bill would impose a
state-mandated local program.
This bill would prohibit a licensee from appointing or continuing
any person as an agent unless the licensee and the person have made a
specified written contract, including a requirement that the agent
operate in full compliance with these provisions. The bill would
prohibit a licensee from appointing any person as an agent unless it
has conducted a review of the proposed agent's fitness to act as an
agent, as provided. Subject to specified notice, if any agent of a
licensee conducts any virtual currency business on behalf of the
licensee, where the commissioner has suspended or revoked the license
of the licensee or the commissioner has issued a specified order,
the bill would make the agent jointly and severally liable.
Within a specified period after the fiscal year, the bill would
require a licensee to file with the commissioner a specified audit
report. Within a specified period after the end of each calendar
quarter, the bill would require a licensee to file with the
commissioner a report containing financial statements verified by 2
of the licensee's principal officers.
This bill would require a licensee to provide a specified consumer
protection disclosure about virtual currency to its consumers.
The California Constitution requires the state to reimburse local
agencies and school districts for certain costs mandated by the
state. Statutory provisions establish procedures for making that
reimbursement.
This bill would provide that no reimbursement is required by this
act for a specified reason.
Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: no yes .
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Division 11 (commencing with Section 26000) is added to
the Financial Code, to read:
DIVISION 11. Virtual Currency
CHAPTER 1. GENERAL PROVISIONS
26000. For purposes of this division, the following definitions
shall apply:
(a) "Commissioner" means the Commissioner of Business Oversight.
(a)
(b) "Virtual currency" means any type of digital unit
that is used as a medium of exchange or a form of digitally stored
value or that is incorporated into payment system technology. Virtual
currency shall be broadly construed to include digital units of
exchange that (1) have a centralized repository or administrator, (2)
are decentralized and have no centralized repository or
administrator, or (3) may be created or obtained by computing or
manufacturing effort. Virtual currency shall not be construed to
include digital units that are used solely within online gaming
platforms with no market or application outside of those gaming
platforms, nor shall virtual currency be construed to include digital
units that are used exclusively as part of a customer affinity or
rewards program, and can be applied solely as payment
redeemed for goods, services, or for purchases
with the issuer or other designated merchants, but cannot be
converted into, or redeemed for, fiat currency.
(b) "Commissioner" means the Commissioner of Business Oversight.
(c) "Virtual currency business" means the conduct of either of the
following types of activities involving a California resident:
(1) Storing, holding, or maintaining custody or control of virtual
currency on behalf of others.
(2) Providing conversion or exchange services of fiat currency
into virtual currency or the conversion or exchange of virtual
currency into fiat currency or other value, or the conversion or
exchange of one form of virtual currency into another form of virtual
currency.
26001. For the purposes of carrying out the provisions of this
division, the commissioner may adopt regulations pursuant to the
Administrative Procedure Act (Chapter 3.5 (commencing with Section
11340) of Part 1 of Division 3 of Title 2 of the Government Code).
CHAPTER 2. LICENSES
26002. (a) A person shall
not engage in this state in the business of
any virtual currency business unless the person is
licensed or exempt from licensure under this division.
(b) No licensee may conduct any virtual currency business activity
through an agent or agency arrangement if the agent is not a
licensee.
26004. The following are exempt from the licensing requirement
described in Section 26002:
(1)
(a) The United States or a department, agency, or
instrumentality thereof, including any federal reserve bank and any
federal home loan bank.
(2)
(b) Money transmission by the United States Postal
Service or by a contractor on behalf of the United States Postal
Service.
(3)
(c) A state, city, county, city and county, or any
other governmental agency or governmental subdivision of a state.
(4)
(d) A commercial bank or industrial bank, the deposits
of which are insured by the Federal Deposit Insurance Corporation or
its successor, or any foreign (other nation) bank that is licensed
under Chapter 20 (commencing with Section 1750) of Division 1.1 or
that is authorized under federal law to maintain a federal agency or
federal branch office in this state; a trust company licensed
pursuant to Section 1042 or a national association authorized under
federal law to engage in a trust banking business; an association or
federal association, as defined in Section 5102, the deposits of
which are insured by the Federal Deposit Insurance Corporation or its
successor; and any federally or state chartered credit union, with
an office in this state, the member accounts of which are insured or
guaranteed as provided in Section 14858.
(5)
(e) An entity licensed as a money transmitter under the
Money Transmission Act described in Division 1.2 (commencing with
Section 2000).
(6)
(f) A merchant or consumer that utilizes virtual
currency solely for the purchase or sale of goods or services.
(g) (1) A transaction in which the recipient of virtual currency
is an agent of the payee pursuant to a preexisting written contract
and delivery of the virtual currency to the agent satisfies the payor'
s obligation to the payee.
(2) For purposes of this subdivision, the following shall apply:
(A) "Agent" has the same meaning as that term is defined in
Section 2295 of the Civil Code.
(B) "Payee" means the provider of goods or services, who is owed
payment of money or other monetary value from the payor for the goods
or services.
(C) "Payor" means the recipient of goods or services, who owes
payment of money or monetary value to the payee for the goods or
services.
26006. (a) An applicant for licensure under this division shall
pay to the commissioner a nonrefundable application fee of
five thousand dollars ($5,000).
(b) An applicant for a license shall do so in a form and in a
medium prescribed by the commissioner by order or regulation. The
application shall state or contain all of the following:
(1) The legal name and residential business address of the
applicant and any fictitious or trade name used by the applicant in
conducting its business.
(2) A list of any criminal convictions of the applicant and any
material litigation in which the applicant has been involved in the
10-year period next preceding the submission of the application.
(3) A description of any virtual currency services previously
provided by the applicant and the virtual currency services that the
applicant seeks to provide in this state.
(4) A list of the applicant's proposed agents and the locations in
this state where the applicant and its agents propose to engage in
the business of virtual currency.
(5) A list of other states in which the applicant is licensed to
engage in the business of virtual currency and any license
revocations, suspensions, or other disciplinary action taken against
the applicant in another state.
(6) Information concerning any bankruptcy or receivership
proceedings affecting the licensee.
(7) A sample form of payment instrument or instrument upon which
stored value is recorded, if applicable.
(8)
(7) A sample form of receipt for transactions that
involve money received for the business of virtual currency.
(9)
(8) The name and address of any bank through which the
applicant's payment instruments and stored value will be
paid. business will be conducted.
(10)
(9) A description of the source of money and credit to
be used by the applicant to provide virtual currency services.
(11)
(10) The date of the applicant's incorporation or
formation and the state or country of incorporation or formation.
(12)
(11) A certificate of good standing from the state or
country in which the applicant is incorporated or formed.
(13)
(12) A description of the structure or organization of
the applicant, including any parent or subsidiary of the applicant,
and whether any parent or subsidiary is publicly traded.
(14)
(13) The legal name, any fictitious or trade name, all
business and residential addresses, and the employment, in the
10-year period next preceding the submission of the application, of
each executive officer, manager, director, or person that has
control, of the applicant, and the educational background for each
person.
(15)
(14) A list of any criminal convictions and material
litigation in which any executive officer, manager, director, or
person in control, of the applicant has been involved in the 10-year
period next preceding the submission of the application.
(16)
(15) A copy of the applicant's audited financial
statements for the most recent fiscal year and, if available, for the
two-year period next preceding the submission of the application.
(17)
(16) A copy of the applicant's unconsolidated financial
statements for the current fiscal year, whether audited or not, and,
if available, for the two-year period next preceding the submission
of the application.
(18)
(17) If the applicant is publicly traded, a copy of the
most recent report filed with the United States Securities and
Exchange Commission under Section 13 of the federal Securities
Exchange Act of 1934 (15 U.S.C. Sec. 78m).
(19)
(18) If the applicant is a wholly owned subsidiary of:
(A) A corporation publicly traded in the United States, a copy of
audited financial statements for the parent corporation for the most
recent fiscal year or a copy of the parent corporation's most recent
report filed under Section 13 of the federal Securities Exchange Act
of 1934 (15 U.S.C. Sec. 78m) and, if available, for the two-year
period next preceding the submission of the application.
(B) A corporation publicly traded outside the United States, a
copy of similar documentation filed with the regulator of the parent
corporation's domicile outside the United States.
(20) The name and address of the applicant's registered agent in
this state.
(21)
(19) The applicant's plan for engaging in the business
of virtual currency, including without limitation three years of pro
forma financial statements.
(22)
(20) Any other information the commissioner requires
with respect to the applicant.
(c) The commissioner may waive any of the information required
under subdivision (b) or permit an applicant to submit other
information instead of the required information.
(d) The nonrefundable application fee for filing an application
for licensure and approval to acquire control of a licensee is three
thousand five hundred dollars ($3,500). An applicant for licensure
and approval shall comply with subdivision (b).
(e) A licensee, including a licensee described in subdivision (b),
shall pay annually on or before July 1, a license renewal fee of two
thousand five hundred dollars ($2,500).
(f) A licensee shall pay annually on or before July 1, one hundred
twenty-five dollars ($125) for each licensee branch office in this
state.
(g) Whenever the commissioner examines a licensee, the licensee
shall pay, within 10 days after receipt of a statement from the
commissioner, a fee of seventy-five dollars ($75) per hour for each
examiner engaged in the examination plus, if it is necessary for any
examiner engaged in the examination to travel outside this state, the
travel expenses of the examiner.
(h) Whenever the commissioner examines an applicant, the applicant
shall pay, within 10 days after receipt of a statement from the
commissioner, a fee of seventy-five dollars ($75) per hour for each
examiner engaged in the examination plus, if it is necessary for any
examiner engaged in the examination to travel outside this state, the
travel expenses of the examiner.
(i) Each fee for filing an application shall be paid at the time
the application is filed with the commissioner. No fee for filing an
application shall be refundable, regardless of whether the
application is approved, denied, or withdrawn.
26008. (a) Each licensee shall maintain at all times such capital
as the commissioner determines is sufficient to ensure the safety
and soundness of the licensee and maintain consumer protection and
its ongoing operations. In determining the minimum amount of capital
that must be maintained by a licensee, the commissioner shall
consider a variety of factors, including, but not limited to:
(1) The composition of the licensee's total assets, including the
position, size, liquidity, risk exposure, and price volatility of
each type of asset.
(2) The composition of the licensee's total liabilities, including
the size and repayment timing of each type of liability.
(3) The actual and expected volume of the licensee's virtual
currency business activity.
(4) Whether the licensee is already licensed or regulated by a
state or federal entity, and whether the licensee is in good standing
in such capacity.
(5) The amount of leverage employed by the licensee.
(6) The liquidity position of the licensee.
(7) The financial protection that the licensee provides for its
customers through its trust account or bond.
(b) In order to satisfy subdivision (a), each licensee shall
invest an aggregate amount equal to the value of the virtual currency
that the licensee has on deposit for its customers in only the
following high-quality, investment-grade permissible investments:
(1) Certificates of deposit issued by financial institutions that
are regulated by a United States federal or state regulatory agency.
(2) Money market funds.
(3) State or municipal bonds.
(4) United States government securities.
(5) United States government agency securities.
(b) Each licensee shall maintain a bond or trust account in United
States dollars for the benefit of its customers in the form and
amount specified by the commissioner.
CHAPTER 2.5. AGENTS
26008.2. (a) A licensee shall not appoint or continue any person
as agent, unless the licensee and the person have made a written
contract. A written contract between a licensee and an agent shall
require the agent to operate in full compliance with this division.
(b) The written contract shall contain each of the following
provisions:
(1) That the licensee appoints the person as its agent with
authority to conduct any virtual currency business on behalf of the
licensee.
(2) That the agent shall make and keep accounts, correspondence,
memoranda, papers, books, and other records as the commissioner by
regulation or order requires, and shall preserve the records for the
time specified by the commissioner pursuant to a regulation or order.
(3) That all virtual currency, less fees due agents provided for
and expressly set forth in the written agreement, received by the
agent on behalf of the licensee shall be trust funds owned by and
belonging to the licensee.
(4) That the agent is subject to joint and several liability
pursuant to Section 26008.8.
(5) Any other provisions that the commissioner may by regulation
or order find to be necessary to carry out the provisions and
purposes of this division.
(c) An agent shall not provide any virtual currency business
outside the scope of activity permissible under the written contract
between the agent and the licensee.
(d) An agent shall not use a subagent to conduct any virtual
currency business on behalf of a licensee.
(e) Each licensee shall exercise reasonable supervision over its
agents to ensure compliance with applicable laws, rules, and
regulations with regard to the virtual currency business.
(f) Licensees conducting any virtual currency business subject to
this division shall maintain full charge, control, and supervision of
any authorized agent and shall be responsible for ensuring any
activity undertaken by an authorized agent on behalf of the licensee
is in compliance with this division.
26008.4. (a) A licensee shall not appoint any person as an agent
unless it has conducted a review of the proposed agent's fitness to
act as an agent and has determined that the proposed agent and any
persons who control the proposed agent are of good character and
sound financial standing.
(b) A licensee shall maintain records of this review for each
agent while the agent is providing any virtual currency business on
behalf of the licensee, and for three years after the relationship
with the agent has terminated.
26008.6. A person, including an agent, shall not provide any
virtual currency business on behalf of a person not licensed or not
exempt from licensure under this division. A person that engages in
that activity provides virtual currency business to the same extent
as if the person was a licensee and shall be jointly and severally
liable with the unlicensed or nonexempt person.
26008.8. (a) No agent of a licensee who has actual notice that
the commissioner has suspended or revoked the license of the licensee
or that the commissioner has issued an order taking possession of
the property and business of the licensee shall conduct any virtual
currency business on behalf of the licensee.
(b) If any agent of a licensee, after first having actual notice
that the commissioner has suspended or revoked the license of the
licensee or that the commissioner has issued an order taking
possession of the property and business of the licensee, conducts any
virtual currency business on behalf of the licensee, the agent shall
be jointly and severally liable with the licensee.
CHAPTER 3. EXAMINATIONS AND RECORDS
26009. (a) The commissioner may at any time and from time to time
examine the business and any branch office, within or outside this
state, of any licensee in order to ascertain whether that business is
being conducted in a lawful manner and whether all virtual currency
held or exchanged is properly accounted for.
(b) The directors, officers, and employees of any licensee being
examined by the commissioner shall exhibit to the commissioner, on
request, any or all of the licensee's accounts, books,
correspondence, memoranda, papers, and other records and shall
otherwise facilitate the examination so far as it may be in their
power to do so.
26010. The commissioner may consult and cooperate with other
state or federal regulators in enforcing and administering this
division. They may jointly pursue examinations and take other
official action that they are otherwise empowered to take.
26011. A licensee shall file a report with the commissioner
within five business days after the licensee has reason to know of
the occurrence any of the following events:
(a) The filing of a petition by or against the licensee under the
United States Bankruptcy Code (11 U.S.C. Secs. 101-110, incl.) for
bankruptcy or reorganization.
(b) The filing of a petition by or against the licensee for
receivership, the commencement of any other judicial or
administrative proceeding for its dissolution or reorganization, or
the making of a general assignment for the benefit of its creditors.
(c) The commencement of a proceeding to revoke or suspend its
virtual currency business license in a state or country in which the
licensee engages in such business or is licensed to engage in such
business.
(d) The cancellation or other impairment of the licensee's bond or
trust account as required by subdivision (b) of Section 26008.
(e) A charge or conviction of the licensee or of an executive
officer, manager, director, or person in control of the licensee for
a felony.
26012. A licensee shall maintain any records as required by the
commissioner for determining its compliance with this division for at
least three years.
CHAPTER 4. ENFORCEMENT
26013. Any licensee may surrender its license by filing with the
commissioner the license and a report with any information as the
commissioner requires. The voluntary surrender of the license shall
become effective at the time and upon the conditions as the
commissioner specifies by order.
26014. (a) The commissioner may prepare written decisions,
opinion letters, and other formal written guidance to be issued to
persons seeking clarification regarding the requirements of this
division.
(b) The commissioner shall make public on the commissioner's
Internet Web site all written decisions, opinion letters, and other
formal written guidance issued to persons seeking clarification
regarding the requirements of this division. The commissioner may, at
his or her discretion or upon request by an applicant or licensee,
redact proprietary or other confidential information regarding an
applicant or licensee from any decision, letter, or other written
guidance issued in connection with an applicant or licensee.
26015. The commissioner may offer informal guidance to any
prospective applicant for a license under this division, regarding
the conditions of licensure that may be applied to that person. The
commissioner shall inform any applicant that requests that guidance
of the licensing requirements that will be required of that
applicant, based on the information provided by the applicant
concerning its plan to conduct business under this division, and the
factors used to make that determination.
26016. At any time, if the commissioner deems it necessary for
the general welfare of the public, he or she may exercise any power
set forth in this division with respect to a virtual currency
business, regardless of whether an application for a license has been
filed with the commissioner, a license has been issued, or, if
issued, the license has been surrendered, suspended, or revoked.
(a) If it appears to the commissioner that a licensee is violating
or failing to comply with this division, the commissioner may direct
the licensee to comply with the law by an order issued under the
commissioner's official seal, or if it appears to the commissioner
that any licensee is conducting its business in an unsafe or
injurious manner, the commissioner may in like manner direct it to
discontinue the unsafe or injurious practices. The order shall
require the licensee to show cause before the commissioner, at a time
and place to be fixed by the commissioner, as to why the order
should not be observed.
(b) If, upon any hearing held pursuant to subdivision (a), the
commissioner finds that the licensee is violating or failing to
comply with any law of this state or is conducting its business in an
unsafe or injurious manner, the commissioner may make a final order
directing it to comply with the law or to discontinue the unsafe or
injurious practices. A licensee shall comply with the final order
unless, within 10 days after the issuance of the order, its
enforcement is restrained in a proceeding brought by the licensee.
26017. (a) The commissioner may issue an order suspending or
revoking a license, or taking possession of and placing a licensee in
receivership, if after notice and an opportunity for hearing, the
commissioner finds any of the following:
(1) The licensee is violating this division or a regulation
adopted or an order issued under this division, or a condition of
approval issued under this division.
(2) The licensee does not cooperate with an examination or
investigation by the commissioner.
(3) The licensee engages in fraud, intentional misrepresentation,
or gross negligence.
(4) The competence, experience, character, or general fitness of
the licensee, or any director, officer, employee, or person in
control of a licensee, indicates that it is not in the public
interest to permit the person to provide virtual currency services.
(5) The licensee engages in an unsafe or unsound practice.
(6) The licensee is insolvent, suspends payment of its
obligations, or makes a general assignment for the benefit of its
creditors.
(7) The licensee has applied for an adjudication of bankruptcy,
reorganization, arrangement, or other relief under any bankruptcy,
reorganization, insolvency, or moratorium law, or any person has
applied for any such relief under that law against the licensee and
the licensee has by any affirmative act approved of or consented to
the action or the relief has been granted.
(8) Any fact or condition exists that, if it had existed at the
time when the licensee applied for its license, would have been
grounds for denying the application.
(b) In determining whether a licensee is engaging in an unsafe or
unsound practice, the commissioner may consider the size and
condition of the licensee's provision of virtual currency services,
the magnitude of the loss, the gravity of the violation of this
division, and the previous conduct of the person involved.
26018. (a) Every order, decision, or other official act of the
commissioner is subject to review in accordance with law.
(b) Whenever the commissioner has taken possession of the property
and business of any licensee, the licensee, within 10 days after
that taking, if it deems itself aggrieved
thereby, may apply to the superior court in the
county in which the head office of the licensee is located to enjoin
further proceedings. The court, after citing the commissioner to
show cause why further proceedings should not be enjoined and after a
hearing and a determination of the facts upon the merits, may
dismiss the application or enjoin the commissioner from further
proceedings and direct the commissioner to surrender the property and
business to the licensee.
26019. (a) If the commissioner finds that any of the factors set
forth in Section 26017 is true with respect to any licensee and that
it is necessary for the protection of the public interest, the
commissioner may issue an order immediately suspending or revoking
the licensee's license.
(b) Within 30 days after the license is suspended or revoked
pursuant to subdivision (a), the licensee may file with the
commissioner an application for a hearing on the suspension or
revocation.
(c) If the commissioner fails to commence a hearing within 15
business days after the application is filed with the commissioner
pursuant to subdivision (b) or within a longer period of time agreed
to by the licensee, the suspension or revocation shall be deemed
rescinded.
(d) Within 30 days after the hearing, the commissioner shall
affirm, modify, or rescind the suspension or revocation. Otherwise,
the suspension or revocation shall be deemed rescinded.
(e) The right of the licensee to petition for judicial review of
the suspension or revocation shall not be affected by the failure of
the licensee to apply to the commissioner for a hearing on the
suspension or revocation pursuant to subdivision (b).
26020. The commissioner may assess a civil penalty against a
person that violates this division or a regulation adopted or an
order issued under this division in an amount not to exceed one
thousand dollars ($1,000) for each violation or, in the case of a
continuing violation, one thousand dollars ($1,000) for each day or
part thereof during which the violation continues, plus this state's
costs and expenses for the investigation and prosecution of the
matter, including reasonable attorney's fees.
26021. (a) A person that intentionally makes a false statement,
misrepresentation, or false certification in a record filed or
required to be maintained under this division or that intentionally
makes a false entry or omits a material entry in such a record is
guilty of a felony.
(b) A person that knowingly engages in an activity for which a
license is required under this division without being licensed or
exempt from licensure under this division is guilty of a felony.
(c) Nothing in this division limits the power of the state to
punish any person for any act that constitutes a crime under any
statute.
26022. The enforcement provisions of this division are in
addition to any other enforcement powers that the commissioner may
have under law.
26023. (a) The commissioner may by order or regulation grant
exemptions from this section in cases where the commissioner finds
that the requirements of this section are not necessary or may be
duplicative.
(b) A licensee shall, within 90 days after the end of each fiscal
year, or within any extended time as the commissioner may prescribe,
file with the commissioner an audit report for the fiscal year that
shall comply with all of the following provisions:
(1) The audit report shall contain audited financial statements of
the licensee for or as of the end of the fiscal year prepared in
accordance with United States generally accepted accounting
principles and any other information as the commissioner may require.
(2) The audit report shall be based upon an audit of the licensee
conducted in accordance with United States generally accepted
auditing standards and any other requirements as the commissioner may
prescribe.
(3) The audit report shall be prepared by an independent certified
public accountant or independent public accountant who is not
unsatisfactory to the commissioner.
(4) The audit report shall include or be accompanied by a
certificate of opinion of the independent certified public accountant
or independent public accountant that is satisfactory in form and
content to the commissioner. If the certificate or opinion is
qualified, the commissioner may order the licensee to take any action
as the commissioner may find necessary to enable the independent or
certified public accountant or independent public accountant to
remove the qualification.
(c) Each licensee shall, not more than 45 days after the end of
each calendar year quarter, or within a longer period as the
commissioner may by regulation or order specify, file with the
commissioner a report containing all of the following:
(1) Financial statements, including balance sheet, income
statement, statement of changes in shareholders' equity, and
statement of cashflows, for, or as of the end of, that calendar year
quarter, verified by two of the licensee's principal officers. The
verification shall state that each of the officers making the
verification has a personal knowledge of the matters in the report
and that each of them believes that each statement in the report is
true.
(2) Other information as the commissioner may by regulation or
order require.
26024. In addition to the fees provided in Section 26006, the
commissioner shall levy an assessment each fiscal year, on a pro rata
basis, on those licensees that at any time during the preceding
calendar year engaged in this state in the virtual currency business
in an amount that is, in his or her judgment, sufficient to meet the
commissioner's expenses in administering the provisions of this
division and to provide a reasonable reserve for contingencies.
CHAPTER 5. MISCELLANEOUS PROVISIONS
26025. A licensee shall disclose to consumers the following
disclosure in a form and manner prescribed by the commissioner:
"Once submitted to the network, a virtual currency transaction
will be unconfirmed for a period of time (usually less than one hour,
but up to one day or more) pending sufficient confirmation of the
transaction by the network. A transaction is not complete while it is
in a pending state. Virtual currency associated with transactions
that are in a pending state will be designated accordingly, and will
not be included in your account balance or be available to conduct
transactions.
The risk of loss in trading or holding virtual currency can be
substantial. You should therefore carefully consider whether trading
or holding virtual currency is suitable for you in light of your
financial condition. In considering whether to trade or hold virtual
currency, you should be aware that the price or value of virtual
currency can change rapidly, decrease, and potentially even fall to
zero.
(Insert company name) is licensed by the Department of Business
Oversight to do business in California. If you have complaints with
respect to any aspect of the virtual currency business conducted by
(company name), you may contact the California Department of Business
Oversight at its toll-free telephone number, 1-800-622-0620, by
email at consumer.services@dbo.ca.gov, or by mail at the Department
of Business Oversight, Consumer Services, 1515 K Street, Suite 200,
Sacramento, CA 95814."
SEC. 2. No reimbursement is required by this act
pursuant to Section 6 of Article XIII B of the California
Constitution because the only costs that may be incurred by a local
agency or school district will be incurred because this act creates a
new crime or infraction, eliminates a crime or infraction, or
changes the penalty for a crime or infraction, within the meaning of
Section 17556 of the Government Code, or changes the definition of a
crime within the meaning of Section 6 of Article XIII B of the
California Constitution.